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bro question say after four years the company is expects a new technology to make the machine redundant but it will be sold in 2006 so 2002, 2003 , 2004, 2005, 2006 becomes 5 years.
required: discuss the effect of the above issues upon the current financial statements of hobble: (show calculations as appropriate
🙂 BOND
To help with the cashflow the company has issued a 100million convertible bond. this bond was iisued at teh start of the year at face value and will be redeemed at face value or converted into equity in four yeas from issue. the market intrest rate for an equivelent bond with no option was 8%.
the bond was secured on the stadium.
(7marks)C) STADIUM
The stadium has an opening carrying value of 24million and a remianing life of 12 years, from the yaer start. the yaer end value is estimated at 40million.
The club sell the stadium to their bank for 30million at the year end. the contract allows hobble to continue to use the stadium and continues to require hobble to maintain the stadium for the next 11years. at the end of the 14years the stadium is transferred back to hobble at a complusory repurchase price of 30million.
In exchange for the right of occupancy hobble will pay 2.4million per annum. this is calculated to be 8% of 30million.
hobble propose to recognise a profit on disposal of 6million.